A new police unit will be established to deal with people at risk of radicalisation or carrying out lone wolf attacks in Victoria, the State Government has announced.

Key points:

Police investigators, intelligence analysts and mental health experts part of new centre

Up to 300 people will be assessed each year

The centre is based on models operating in NSW, Queensland and the UK

The $31.6 million threat assessment centre will monitor people who make threats, are socially isolated and who could pose a risk of committing acts of terror or extreme violence.

A team of 25 investigators, intelligence analysts and forensic mental health experts will work to monitor up to 300 people a year.

The unit will either refer at-risk people to mental health services or charge them.

Police Minister Lisa Neville said the centre, which is based on similar units in New South Wales, Queensland and in the UK, was being put in place in the wake of the Bourke Street rampage.

"It will take referrals and use intelligence to identify people who might be isolated or displaying very concerning behaviour, and may benefit from a mental health referral or other sort of intervention to reduce the risk of that person causing attacks in our community," she said.

"It may be someone who is not profiled as a terrorist but capable of some sort of lone wolf act.

"I think it will make a really huge difference to improving community safety.

"It is increased capacity, it's not taking resources from other parts of the system."

Victoria Police Assistant Commissioner Ross Guenther said the unit would use information from the National Security Hotline, tips from the public and referrals from within the health system.

He said the unit would also assess people police were currently monitoring.

"If we can assess people early on and understand that they need treatment plans and more overt action then we'll be in a very, very effective position to take that action," he said.

"One of the things we do know is people tend to drop off the radar.

"So if we look to international examples, both in the UK and the Netherlands, they've been very effective in the early identification that people could be a threat to either office holders within government and the broader community or to police and the military.

"And [they have] been very effective in designing treatment plans that actually mitigate that risk."